Mortgage Rates: Which One Is Best For You?

By Rony Walker

Mortgage rates are amortized over a preferred loan term and
depend on your qualifying annual income. To determine this,
mortgage companies adopt ratios to evaluate your mortgage
monthly payments of both principal and interest. Some companies
offer some flexibility, but which one is best for you?

Choosing the Right Mortgage

There will always be a mortgage to suit your needs. It is a
matter of understanding the mortgage rates, so don’t jump into
the bandwagon when you hear that mortgage rates are lower at
this time.

Aside from the lower interest rates to study, include in your
estimates the fees you have to pay before and during the closing
of the loan. That should include expenses with the documentation
requirement for the loan.

Your Mortgage

Lenders carefully analyze three things when you take out a
mortgage:

1. your credit history
2. your financial situation
3. amount you need to borrow
4. amount for your down payment

Mortgage rates are the terms you apply during the loan term in
paying for your home. Depending on the lenders’ evaluation of
the above criteria, you may have several or few options for
mortgage rates. Give the list a rundown before you go to a
lender.

The Types of Mortgage Rates

There are generally four types of mortgage rates. Each have
different monthly amortization plans, and come with their
separate advantages and disadvantages, precisely why you should
be cautious in selecting the appropriate loan tailor-fitted to
your financial circumstance.

Fixed Rate Mortgages

This traditional type of loan provides you the option of
choosing a loan term of 10, 15, 20, or 30 years. The interest
rates do not change throughout the term. For this loan, you will
be required by the lenders to give 5% of the home’s total cost
during the closing.

Adjustable Rate Mortgage (ARM)

Lower interest rates for the first few years are offered by
this particular loan, depending on the terms you have agreed to.
Some ARMs will adjust to a fixed rate mortgage while some will
not.

Because this type of loan is capped, interest rates will go and
stay as high until the last day you pay off the loan. It would
be a smart move to get this type of loan if you foresee a steady
increase in wages in the future because you can always refinance
later.

Balloon Mortgages

This loan is right for you if you want a short loan term or
planning to stay in the home for a few years (five to seven
years) because it offers lower mortgage rates for a repayment
period of 7 years.

If after the loan term you still have a sizable balance unpaid,
or if you decide to stay on and have an unpaid balance, you can
refinance. You can borrow from either the same lender or a
different one.

Jumbo Loans

Lenders give this option to those who pass the criteria because
of the higher monthly payments. Borrowers must have excellent
credit histories with the income to match. This loan permits a
higher amount to allow borrowers to buy homes in the
million-dollar range.

How much you can afford for the monthly payment, attendant
fees, when you can break even, and your financial situation and
prospects are just some of the few things you have to examine
before you can get the right mortgage with the matching mortgage
rates.

About the Author: At http://WhatAboutLoans.com, know all about
the different types of mortgage rates
(http://www.whataboutloans.com/mortgage/mortgage-rates.html)
before taking out a refinance home mortgage
(http://www.whataboutloans.com/mortgage/mortgage-refinance-loans.html)
or a California refinance
(http://www.whataboutloans.com/state/mortgage/california.html)
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